With A -16% Earnings Drop, Did Beijing Enterprises Environment Group Limited (HKG:154) Really Underperform?

Analyzing Beijing Enterprises Environment Group Limited’s (SEHK:154) track record of past performance is a valuable exercise for investors. It enables us to reflect on whether or not the company has met expectations, which is a powerful signal for future performance. Today I will assess 154’s recent performance announced on 31 December 2019 and compare these figures to its long-term trend and industry movements.

View our latest analysis for Beijing Enterprises Environment Group

Was 154’s recent earnings decline worse than the long-term trend and the industry?

154’s trailing twelve-month earnings (from 31 December 2019) of HK$222m has declined by -16% compared to the previous year.

Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 39%, indicating the rate at which 154 is growing has slowed down. Why could this be happening? Well, let’s take a look at what’s going on with margins and whether the rest of the industry is experiencing the hit as well.

SEHK:154 Income Statement June 12th 2020
SEHK:154 Income Statement June 12th 2020

In terms of returns from investment, Beijing Enterprises Environment Group has fallen short of achieving a 20% return on equity (ROE), recording 7.1% instead. Furthermore, its return on assets (ROA) of 3.1% is below the HK Commercial Services industry of 6.0%, indicating Beijing Enterprises Environment Group’s are utilized less efficiently. However, its return on capital (ROC), which also accounts for Beijing Enterprises Environment Group’s debt level, has increased over the past 3 years from 1.2% to 6.5%.

What does this mean?

While past data is useful, it doesn’t tell the whole story. Companies that are profitable, but have capricious earnings, can have many factors impacting its business. I recommend you continue to research Beijing Enterprises Environment Group to get a better picture of the stock by looking at:

  1. Financial Health: Are 154’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
  2. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

NB: Figures in this article are calculated using data from the trailing twelve months from 31 December 2019. This may not be consistent with full year annual report figures.

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